SPIRITED AWAY

Airline Risks Imminent Collapse as Trump’s War Spikes Fuel Costs

They had agreed on a savior deal, then four days later, the White House started dropping bombs.

President Donald Trump’s war with Iran has left Florida-based Spirit Airlines in dire straits.

The budget carrier is exploring the possibility of liquidation, after skyrocketing fuel prices have pulled the ladder away on its route out of bankruptcy, according to sources cited by The Wall Street Journal.

Trump’s invasion of Iran has caused the Middle Eastern nation to place a vice-like grip on the Strait of Hormuz, which sees around one-fifth of the global oil supply flow through it during peacetime.

The closure of the strait has infuriated the president and caused gas prices to rise above $4 a gallon and jet fuel prices to double in the first few weeks.

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Sources familiar also told Bloomberg that Spirit Aviation Holdings Inc. was at risk of liquidation, and that a decision could come this week. Sources speaking on grounds of anonymity also confirmed the reports to CNBC.

Spirit declared Chapter 11 bankruptcy in August and, in February, reached an agreement with creditors to reemerge as a smaller operation, trimming billions in debt and with a pared-down fleet. It came only a year after filing for bankruptcy for the first time, The Journal reports.

“This is a true restructuring of the operations and profile of this business, when the first bankruptcy was not,” Chief Executive Dave Davis said at the time, according to the Journal.

Four days later, the first bombs fell and the price of fuel went through the roof.

Now the lenders say the plan doesn’t factor in the rise in costs, the Journal reports.

According to a court filing on Friday, attorneys for the lenders said: “If the debtors cannot demonstrate their viability at current (or possibly higher) fuel prices, they have no basis to represent that the plan is feasible.”

Jet fuel is a consistent major expense for airlines, but those that don’t adopt Spirit’s low-budget business model can raise ticket prices to offset the increase. For the South Florida-based operation, that isn’t an option in the same way.

Bids to merge with other airlines in the past have been unsuccessful, notably when a judge blocked its acquisition by JetBlue Airways Corp on antitrust grounds prior to Spirit’s first bankruptcy.

“We don’t comment on market rumors and speculation,” Spirt told the Daily Beast following the news of the possible liquidation.

The airline remains in operation at the time of publication.

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Harry ThompsonNews Reporter

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